Editor’s note: This is part two of a Heath Affairs Blog series of case studies examining how states are preparing for the possibility that the Supreme Court will, in its King v. Burwell decision later this month, prohibit premium tax credits under the Affordable Care Act in states using the federally facilitated Marketplace. Part one of the series laid out some overall themes from the case studies and examined Florida’s preparations for the King decision. Part two of the series below focuses on Michigan and New Hampshire, and tomorrow the third and final series installment will look at North Carolina and Utah and offer some concluding thoughts. The research described in this series was supported by the Commonwealth Fund.

Michigan

Although Michigan came within inches of establishing its own state-based exchange, the state ultimately decided to default to HealthCare.gov. As a result, almost 700,000 Michiganders stand to lose tax credits in 2016 if the Supreme Court rules in favor of the King plaintiffs. Contingency planning is nonetheless at the early stages, and our interviewees doubted that there is a viable political path to a state-based exchange.

In September 2011, the recently elected Republican governor, Rick Snyder, endorsed creating a state-based exchange. “I do not support a ‘one size fits all’ federal approach to health reform, which is where we would be if we were to allow the federal government to run a health insurance exchange in Michigan.” The announcement met with near-unanimous support from business leaders, insurers, and hospitals.

At the same time, the Tea Party and affiliated groups began to lobby the Republican legislature to stop the creation of a state-based exchange. Initially, they appeared to make little headway, and a bill to create an exchange passed the Senate in November 2011. But the bill met with resistance from House Republicans, who announced that they would not vote on the Senate bill until after the Supreme Court ruled on the constitutionality of the individual mandate the following June. Republicans eventually voted the bill down in November 2012.

With the state-based exchange now conclusively dead, Governor Snyder moved to establish a partnership exchange with the federal government. But an unanticipated fight erupted over a $30 million planning grant that Michigan had received with the Department of Health and Human Services (HHS) to help create a partnership exchange. Under the Michigan Constitution, Snyder could not spend the grant money without an appropriation from the legislature. The House passed a bill to appropriate the money; then-Speaker Jase Bolger remarked that “I don’t support Obamacare, but I don’t have Obamacare phobia whereby I think that it’s just going to go away if we do nothing.” Conservative activists mobilized, however, and successfully urged the Senate to decline to act on the measure. The Obama administration’s deadline for partnership funding came and went, thwarting Snyder’s effort to create a partnership exchange.

The two-and-a-half years of scorched-earth battles in Michigan over the creation of an exchange have made the political establishment wary of reopening the question. Snyder’s continuing support for a state-based exchange is by no means a given, especially since the legislature became even more conservative after the 2014 election, with Republicans gaining five seats in the House and Senate. But Snyder at least remains open to the possibility of creating a state-based exchange: If the subsidies are struck down, he has said, “that raises the question, ‘should we be looking at a state Exchange again?’ and that’s a dialogue I would have to have with the Legislature.”

Legislative leaders have said nothing publicly about where they stand. The office of the Speaker of the House Kevin Cotter declined to speak with us, saying only that “the Speaker does not like to opine on current litigation” because “[w]e don’t want to be seen as trying to influence the decision of the court.” Given how effectively the Tea Party and affiliated organizations mobilized opposition during the long-running exchange debates, the reluctance to speak publicly is perhaps understandable. Legislators believe that the Tea Party and other conservative political advocacy groups would mobilize effectively against any action to implement a state exchange.

Although legislators sense that the Tea Party’s power in Michigan has waned, they are quick to note that the state’s 2011 redistricting occurred after the election of a number of members backed by the Tea Party. Legislators in “safe” conservative districts may fear provoking a primary challenge more than they do a liberal opponent, making them especially reluctant to cast a vote in favor of ACA participation.

Some legislators expressed mild optimism stemming from Michigan’s 1993 adoption of legislative term limits. Democratic legislative leaders believe that term-limited legislators will be more likely to support creating a state-based exchange — and there are a lot of term-limited legislators. Of the thirty-eight sitting senators, twenty-eight are ineligible for reelection, and more than one-third of the House face term limits. With so many legislators relieved of the fear of electoral penalties for taking a difficult vote, some insiders we interviewed believe that legislative support for the creation of a state-based exchange could perhaps tip if federal subsidies were on the line.

In the meantime, policymakers’ skittishness has impeded preparation efforts. Although the governor’s office and state legislative leaders are quietly looking at their options, there has been little in the way of concrete planning. Snyder might have the technical authority to create an exchange through executive order, but our interviewees thought it unlikely he would act without at least the tacit support of the legislature. And the legislature is distracted by state budgetary issues, negotiations with HHS over a second waiver for their Medicaid expansion, and the Supreme Court’s marriage equality case, where Michigan is one of the defendants. Given the political challenges, Michigan does not appear especially likely to transition to a state-based exchange after King comes down.

New Hampshire

New Hampshire leaders are hesitant to commit to any specific contingency plans for King, but they believe their state could perhaps move quickly to deal with any fallout. The state’s Department of Insurance already performs core functions of the exchange, including plan management, consumer assistance, and rate review. Legislation passed in 2012 established an advisory board consisting of insurance carriers, brokers, consumers, and other stakeholders; that board could transition to be the board of directors for a new state-based exchange.

Governor Maggie Hassan, a Democrat, is not involved in developing backup plans, though the Department of Insurance and the Department of Health and Human Services are studying options. The leading proposal is nicknamed the “magic wand”: legislation that would simply declare that the functions currently performed by the state are enough to meet the federal definition of a state-based exchange, even if it relies on HealthCare.gov. One leader called this the “dub thee option” — the legislation would say to the partnership, “I dub thee to be a state-based exchange.” (Whether this approach would pass legal muster is open to question.)

A magic wand bill was introduced during the current 2015 session by Democrat Ed Butler. Some ACA supporters worried that it was premature to act before the Court’s decision; others feared that the legislation would signal to the Supreme Court that states would be prepared to pick up the pieces if the Court ruled against the government in King. In any event, Republican leaders refused to allow the bill to be withdrawn, preferring to defeat it themselves. The final vote in the House was 237 to 131.

Leaders on both ends of the political spectrum are optimistic that they can work together on a compromise post-King. However, political opposition to the ACA simmers below the surface. The legislature has a history of blocking ACA implementation, particularly in 2011 and 2012, when the Republican-controlled legislature was noteworthy for an outspoken and influential Tea Party presence. It refused to appropriate most of the $1 million planning grant accepted by then-Governor John Lynch, a Democrat, and created the Joint Health Care Reform Oversight Committee to approve or reject any ACA implementation done by the executive branch. Eventually, Governor Lynch signed House Bill 1297, which specifically prohibited the creation of a state-based insurance exchange. Although the governor felt he won enough flexibility to do a partnership exchange, some people we interviewed say that signing House Bill 1297 is one of the decisions he regrets most from his time in office.

The political climate in 2013 and 2014 was dramatically different, with the election of a new Democratic governor and Democrats winning back control of the House. When Governor Hassan asserted that the compromise language in House Bill 1297 permitted her to pursue a partnership exchange, the legislature did not object. The Obama administration approved New Hampshire’s partnership exchange in March 2013.

When asked what they would do if the Supreme Court rules against the Obama administration, the leaders we interviewed generally responded in two ways. First, even if the Supreme Court sides with the plaintiffs, they cannot imagine that the federal government would allow financial assistance to be taken away. They believe that the Court will issue a narrow ruling to mitigate negative effects, that Congress will give states time and legislative flexibility, or that the Obama administration will develop backup options.

Second, state leaders turned the conversation to Medicaid. In 2014, the state expanded Medicaid after a long and contentious debate. The compromise was ultimately bipartisan, but required a federal waiver. Under that waiver, New Hampshire will require Medicaid beneficiaries, starting in 2016, to purchase coverage from private insurers in the exchange. For New Hampshire, the loss of exchange subsidies would not directly affect the Medicaid population. But state leaders are anxious that the confusion and disruption on the exchanges could complicate efforts to reauthorize Medicaid in 2016, as is required under New Hampshire law. That’s especially so since the House of Representatives is once again under Republican control.

For many state leaders, it is thus incumbent on New Hampshire to act swiftly to restore subsidies. Hassan supports the ACA, so the major question will be how the legislature responds. Some people we interviewed feel that this Republican majority is more moderate than the legislators in 2011 and 2012 who passed legislation prohibiting an exchange. Others say this group is “better behaved” and not as vocal, but is just as conservative and committed to opposing ACA implementation.